With Marsh merging its three networks underneath one banner and consolidation persevering with to scale back the pool of potential dealer members, Martin Friel investigates what the long run holds for networks.

Dealer networks have grow to be such an accepted a part of the insurance coverage panorama that it’s laborious to think about a time once they didn’t exist. At the moment, there are round 10 established gamers, using a spread of fashions, boasting round 1,500 members and owned by a spread of organisations.

The panorama has, by and huge, remained fairly regular over the past 15-20 years, however that has modified within the face of the most recent spherical of consolidation, culminating in Marsh merging three networks – Bluefin Community, Purple Partnerships and Marsh ProBroker.

As well as, Compass was purchased in 2018 by Bravo Group (the father or mother of Dealer Community), and Cobra Community was taken into the PIB fold in 2019. In the meantime, networks throughout the board have seen their membership picked off by consolidators.

To start with
To know if that is the start of the tip for networks, it’s essential to look again to grasp what made them related within the first place.

“One of many huge drivers was regulation,” stated a former Dealer Community worker.

“Brokers have been beginning to grow to be closely regulated they usually didn’t know what to do. Grant Ellis (founding father of Dealer Community) additionally latched on to the truth that there was an ageing profile and that these brokers have been simply going to die off.”

One other who was round at the start was Sara Fardon, managing director of Willis Towers Watson Community. “Insurers have been beginning to pull again on companies and there was a concern issue for brokers about entry to market,” she commented. 

The success of Dealer Community and Willis in responding to those issues prompted a splash to the community mannequin, with Cobra, Bluefin, Ten, Brokerbility, Purple Partnerships, Marsh ProBroker, Momentum and Compass all coming into the fray over the next 10-15 years.

These networks provided an ever-increasing vary of providers, together with HR, advertising and marketing, accounts, compliance and IT assist, and that’s just about how they’ve remained – tweaked across the edges however with no actual evolution. 

However in a quickly altering market, how lengthy can this largely unchanged mannequin survive within the face of the consolidation onslaught?

We now have misplaced our justifiable share of brokers to consolidators… However for everybody that sells, there may be someone who doesn’t need to be consolidated

Sara Fardon

Brokerbility chairman Ashwin Mistry has been fairly open in regards to the impression consolidation has had on his community, however he insisted long-standing deal with high quality and professionalism has meant little fallout from insurers.

“At our peak, we had about £600m in GWP by our 36 members, however we now have had quite a few high-profile exits over the previous few years because of consolidation,” he stated.

“We thought we would have liked to be at a sure degree, however we now have obtained continued assist from insurers. They’re receptive to market modifications, and our ethics and philosophy nonetheless maintain good. Even with a falling GWP, we get the identical assist,” Mistry added.

He argued that he needs Brokerbility to grow to be an “incubator” for smaller brokers and the enterprise is just not alone in pursuing this technique. 

“We now have misplaced our justifiable share of brokers to consolidators,” Willis’ Fardon confirmed. 

“However for everybody that sells, there may be someone who doesn’t need to be consolidated, and out of it we now have additionally acquired some actually good alternatives.

“We would like brokers [regardless of size] who’ve the potential to develop.”

For these two, specializing in a smaller variety of members which might be dedicated to progress appears to be a solution to the consolidation conundrum. However how do those that are consolidating and in search of scale stay related? 

David Hopwood, head of the newly minted Marsh Networks, advised Insurance coverage Age that bringing the three networks collectively gives extra, not much less, selection for members.

“The explanation for bringing the propositions collectively is solely to allow us to supply extra of the services and providers we offer to extra brokers,” he stated. 

He added that, whereas the standard causes for becoming a member of a community stay legitimate (insurer services, tailor-made merchandise and shopping for energy), there’s a rising deal with basic enterprise assist.

“An excellent community ought to present assist for the enterprise of the dealer, easing a number of the administrative burdens and, in the end, leaving them with extra time to take care of their purchasers,” Hopwood stated.

Lately, this has prolonged to serving to members get in on the consolidation act themselves: “We put the events collectively and sometimes they are going to favor to promote to somebody throughout the community.”

Consolidation inside a community has been taken a step additional by Bravo, which has arrange a devoted facility, Ethos, to purchase members seeking to promote. Made up of Dealer Community and Compass, Bravo has by far the biggest membership, with round 750 brokers.

However group CEO Des O’Connor argued that acquisition is just not the core objective of the community, merely an possibility that members had requested. He additionally stated the explanations brokers nonetheless discover networks enticing are the identical as they’ve at all times been.

Networks: Who’s who

Bravo Group homes Dealer Community and Compass Dealer Networks, which collectively have 750 members controlling £2.4bn in GWP
Dealer Community was first established in 1994 and was later introduced along with Countrywide Community (previously a part of Open GI) underneath mutual father or mother Towergate, in 2013. This mixed community was purchased from Ardonagh (previously Towergate) by Ardonagh backers HPS Funding Companions and Madison Dearborn Companions and moved underneath Bravo Group.
Compass was shaped in 2013 following the acquisition of Giles by Gallagher in the identical yr and was later the topic of an MBO by John Lincoln in 2016. Two years later, it was purchased by Bravo.
Marsh Networks was shaped in 2020 with the merger of Marsh ProBroker, Bluefin Community and Purple Partnership. The mixed community has 280 members. 
Ten Insurance coverage was arrange in 2005 as an alternative choice to the present community mannequin, centered upon creating ARs. It at the moment has round 108 members and is the one community to be employee-owned.
Cobra, arrange in 2003, at the moment has round 104 members who management roughly £310m in GWP. One of many longest-established networks, it was purchased by PIB in 2019.
Willis Community was arrange in 1999 and at the moment has 88 members controlling round £450m GWP. It is without doubt one of the few networks to not have modified possession over time. 
Momentum Dealer Providers was the second main AR community to look, launching in 2010. It at the moment has 70 members who management £40m in GWP.
Brokerbility, an organization that has at all times tried to keep away from the community label, was arrange in 2006 and at the moment has 27 members controlling round £400m in GWP.

For a lot of smaller brokers with restricted assets, a mandatory deal with gross sales means that there’s little time for the much less speedy however equally essential duties.

“How are you going to handle in a really regulated surroundings, make sure the compliance regime is as much as scratch, consumer cash is working nicely and that your web site is as much as scratch?” O’Connor requested.

He added that regulation is as sturdy a driver in the direction of community membership because it has ever been: “It’s not simply basic compliance – it’s maintaining with it.”

He believed that networks will stay related so long as prospects need unbiased service, arguing that membership of a community helps be sure that stays the case.

“Brokers having their voices heard at insurers helps them to assist the tip shopper,” he stated. 

And having welcomed almost 50 new members into the fold final yr, evidently this enchantment is known by regional brokers.

“Our position is to verify we will take a small dealer on their journey to turning into a big dealer,” he famous, including that he has seen “fairly an affordable inflow of appointed representatives (ARs)” becoming a member of within the final yr, primarily from AR networks.

Howard Pepper, MD of AR community Momentum Dealer Options, stated that that is usually the pure path for ARs however that it really works each methods.

“We predict that the Momentum mannequin works for brokers as much as round £5m GWP. After that, direct authorisation may begin to make sense, however it may well nonetheless be marginal,” he continued. 

“Equally, there are a lot of immediately authorised companies that would definitely be higher off as an AR of an acceptable principal and we now have transformed just a few.”

In Pepper’s view, consolidation of networks reduces choices for members and prospects and discovering the proper match will grow to be tougher as selection reduces.

Whatever the strategy they make use of, networks appear snug sufficient with their propositions and their capability to outlive. And whereas brokers might have their providers, a community is barely as viable because the insurer assist it receives. However that too, in sure quarters at the least, appears to be holding.

How are you going to handle in a really regulated surroundings, make sure the compliance regime is as much as scratch, consumer cash is working nicely and that your web site is as much as scratch?

Des O’Connor

Insurer assist
“Networks are an accepted a part of Axa’s distribution technique,” stated Nick Watson, director of distribution and buying and selling at Axa Business Strains Middleman.

He added that over the past 5 years, Axa has seen 5-10% progress from networks, which matches a protracted solution to explaining why they’re such a core a part of that technique.

“Profitability? Usually it’s been a constructive expertise for us,” he stated. 

“It’s about attain. We, and another insurer, are trying on the panorama and it nonetheless bears the identical hallmarks of the previous, with tons of of unbiased brokers in cities throughout the nation and it’s fairly laborious for them to get entry to huge insurers.”

Watson famous that it really works each methods, with networks serving to insurers present the service proposition to these brokers that they’d prefer to.

“They’re a pure dwelling for brokers who need to stay unbiased and there may be an attraction to that in a consolidating market,” he continued.

One of many early arguments for the worth of networks was that they would cut back administration prices for insurers, however Watson disagreed that this ought to be the principle focus.

For him, it’s about distribution with the proper companion brokers, aligning methods and having a central level of contact and communication with doubtlessly tons of of brokers. However, equally, there may be the ingredient that lots of the networks offered themselves upon within the first place – an alternative choice to that.

“They’ve to consider the way in which wherein they promote themselves as a response to consolidation and if a number of the networks get it proper, they might be an antidote to consolidation,” he famous. 

They [networks] have to consider the way in which wherein they promote themselves as a response to consolidation and if a number of the networks get it proper, they might be an antidote to consolidation

Nick Watson

Remaining legitimate
The unique networks arrived and blossomed simply earlier than and through the first spherical of consolidation and the arrival of regulation. A lot of these organisations survive to this present day (albeit underneath new possession) and their deal with offering a viable different path to survival to the regional, unbiased dealer stays as legitimate because it was 20 years in the past.

Like many issues in insurance coverage, whereas the world round it modifications and dynamics inside it could shift, the basics and the cyclical nature of all of it stays the identical. 

And so long as that’s the case, evidently networks in all their varieties will proceed to be in demand for each members and insurers. The important thing for continued survival, it appears, is sustained evolution.